Comment: A break from Brexit

Could October leave date save the summer? Asks Ian Taylor

There will be intense relief in most parts of the industry that we have a new Brexit deadline.

No doubt many would have preferred sometime next year if not never, but at least October 31 allows completion of the summer season.

There is reason to hope that outbound bookings, which have stalled since the turn of the year, will now flow in.

It’s easy to say with hindsight, but it was always likely the Brexit process would go to the wire.

How could it be otherwise when the UK’s governing party is split and the cabinet divided and when a majority of MPs favoured Remain and oppose leaving with no deal.

In these unpromising circumstances, Theresa May sought to accomplish two incompatible objectives.

One, she resolved to try to hold together the Tories – when the objectives of its sizeable Brexiter wing are opposed by most UK business leaders.

Two, she sought to deliver as-business-friendly a Brexit as possible while adhering to the demands of the Brexiters.

The prolonged uncertainty this brought has enraged business and exhausted most people’s attention.

To understand why it has dragged on so long, it helps to understand something about May.

First, whatever impression she gives to the contrary, May desperately wanted to be prime minister and won’t go unless forced out.

She has been on the point of departure for months but remains in office perhaps until the end of October now.

That would suit EU leaders who certainly don’t want to have to deal with anyone else unless they command a majority in Parliament.

Yet if cross-party talks break down, as they may, Labour could move another no-confidence vote which this time might attract enough Tory votes to bring May down.

Labour wants a general election, of course. May reportedly flirted with that idea in recent days but was dissuaded by the outcry among Tory MPs. The latest polls – and Tory party polling – suggest Labour would emerge the biggest party.

Second, May’s ability to soldier on regardless of whatever setback or pillory she endures apparently stems from the fact that she looks at no media at all. That is right, none.

Third, May reportedly talks to and confides in next to nobody – certainly not her cabinet.

She arrives at decisions through conversing almost exclusively with her chief of staff Gavin Barwell, Conservative chief whip Julien Smith and her husband Philip.

Barwell tells May she must turn her back on the Tory Brexiters and appeal to Labour MPs in order to make a breakthrough on Brexit.

That would inevitably mean concessions on her Brexit ‘red lines’ and some sort of customs union with the EU.

Smith tells May she must on no account deal with Labour, but instead reach out to the Brexiters or risk destroying the Conservative Party.

Philip reminds her that the two of them have been Tory activists for their entire adult lives and she can’t destroy the party.

He and Smith have carried the day pretty much up to last week and May still balks at crossing those red lines, which is why the recent talks with Labour stalled.

The longer the delay, the softer the Brexit?

We could catalogue May’s mistakes, but there have been two key moments in the process.

The first was when May called a General Election in 2017 and lost her majority. That left her needing the support of Brexiter MPs, the most extreme of which she had hoped to ignore with an increased majority, and the Northern Ireland Loyalist party the DUP.

The Irish border was always going to be an issue, but this made the Irish ‘backstop’ a crucial block.

The second stemmed from May’s loss of overall control in Parliament when MPs gave themselves a decisive say on any agreement.

From that moment, May was always going to flounder. She kept the possibility of ‘no deal’ alive to placate the Brexiters and to try to rally Remain MPs to her deal for fear of something worse.

‘My deal or no deal’ became her mantra to Europhile MPs. ‘My deal or no Brexit’ was her mantra to Eurosceptics.

May never wanted no deal and at the final moment she blinked, to the fury of the most-fervent Brexiters.

For some time, it has appeared there would be both a deal and a delay and that the longer the delay, the softer the Brexit.

We had one brief delay. We now have another – though not so long as might have been thanks to President Macron.

No deal remains a possibility, of course, but revocation now appears at least as likely and probably more so and a general election seems much more likely than either – with a second referendum improbable without an election first.

I would not underestimate the ability of EU leaders and bureaucrats on both sides to fudge their way to a further delay if needed or to a one-minute-to-midnight deal in October. It is what they do.

But it’s important to note a ‘deal’ would still only mean a standstill agreement. The real negotiations have yet to begin.

Things could be worse

Where does this leave the travel industry? The UK outbound sector has suffered through the peak summer booking period, though perhaps not to the extent it might have done.

Latest booking data from industry analyst GfK show summer bookings down 11% year on year in the week to Saturday, April 6.

That followed a 5% decline the previous week and substantial declines year on year in most weeks since mid-January barring a fortnight in late February, early March.

GfK senior client insight director David Hope said this week: “Things are not getting any better. People are just holding back. Everything is down – all EU destinations.”

Yet season-to-date summer bookings remained 1% up year on year going into this week, when 2018 was a record year for outbound holidays.

Discounting appears to be rife so the price holidays are selling at may be another story, but the season-to-date average selling price remains slightly up on last year according to GfK.

At the same time, late sales for the current winter surged in the week to April 6, up 17% on the comparable week last year – albeit that fell during the Easter 2018 holiday.

These bookings would have been solely for April departures and followed an 8% rise in bookings for the current winter in the last week of March.

It might be a sign of demand kicking in the moment a March 29 Brexit was postponed, but the April 12 deadline was still in place.

Season-to-date bookings for the winter remain 4% up – so neither this winter nor the summer appear to have been trashed by the uncertainty.

It is reasonable to hope, with certainty about arrangements for the remainder of the summer, that demand may now pick up and the value of sterling hold reasonably steady.

Remarkably, the business newspaper the Financial Times reported (March 19) that: “Despite the seemingly endless confusing political noise, the pound is the best-performing major currency in the world against the dollar in 2019.”

Things could be worse. However, the circus will resume immediately after Easter. Enjoy the break.

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